Alvotech (ALVO) Earnings Call Transcript & Summary

Okay, everyone. Welcome to this global investor call in connection with Alvotech launching up to $125 million convertible bond offering. I'm pleased to introduce the CEO of the company; Robert Wessman, the CFO of the company; Linda Jonsdottir, the CEO; Joseph McClellan, and the Head of Investor Relations, which is Patrik Ling. There is one page in the presentation with the convertible bond terms. We can go through that afterwards. There will also be a Q&A session [Operator Instructions]. But now I will hand over to the CEO, Mr. Robert Wessman.

Yes. Thank you so much. First of all, I want to thank you, everyone, for joining in here today, and this was on a short notice, I guess, for some. So thanks for joining. We will have 15 minutes presentation, so we will go fairly fast through the deck, but as mentioned, we will have a Q&A in the end. So the company was founded 2013 by myself and other investors which came in later on. We wanted to build out one of the leading biosimilar companies in the world. And the key ingredients being best-in-class R&D, best-in-class manufacturing, strong portfolio and pipeline and then having a global marketing reach. Since 2013, we have invested around $2 billion into the business. We have around 30 products in the pipeline, in the development pipeline. We have now five products outside U.S. on some of the key markets. And we have two products for now until we clear the CRL, which is out there for the pending approval until next year. So we have 19 commercial partners, and I will talk about that a bit more on following slides. The company has been growing around 74% CAGR since '21 until '26. But we are releasing today also indicative guidance for both top line and EBITDA. We launched the first product into the Europe towards '22. And we launched the first commercial product into the U.S. market 2024. If we go to the next slide, as I said, we have a very healthy partnership and network of strong commercial partners. All those partners are -- we can say, co-investing into our R&D, simply because they are paying us milestones for access to our intellectual property. So you can see in our P&L that milestone revenues now have exceeded R&D costs. So we can say, technically, our partners are basically paying us fees with cumulative are higher than our R&D cost. And then we have exclusive supply arrangement with all those partners. And once we get approval across the world, we start to roll out the products where we produce those in Iceland. We basically have Teva, the lead partner in U.S., the biggest market in the world. We have a private label with Quallent. We have done a very strong partners in Europe, which includes data and advance. And then we have multiple partners covering Latin America, Middle East and Asia. The company today has around 1,500 employees and over 1,000 people in Iceland, where we have both manufacturing, main part of the manufacturing, main part of R&D. And we have then the second biggest function is in Sweden, Stockholm, where we did buy out the R&D function of Xbrae half a year ago or so. We then have a supportive units in both Germany, in Switzerland and India towards the regulatory and R&D. And that kind of is our network of offices and team across the world. So before I hand it over to Joseph McClellan, which is our Chief Operating Officer, we have been going through since year 2022, multiple regulatory health authorities inspection, multiple times through the EMA. We are approved in Canada, Latin America, Middle East, Japan and multiple other markets, European Union, of course. We went through earlier this year through EMA and Japan, health authorities, which actually resulted in approvals and all those inspections, we got some minor comments. And last year, we went through 2x FDA inspection. And as I mentioned earlier, it was only midyear last year, we became commercial in U.S. and the first inspection with FDA was 143 and very late last year, which was a very broad GMP inspection, we got two fairly minor 483s. This time around, we got the team to come in, and this was a pre-approval inspection, which is slightly different than a general GMP inspection, which resulted in delay of getting through three product approved. actually 4 BLAs. So the company has been working pretty hard since then to make sure that the comments which FDA had on our facility is being addressed. We believe that we are in a good place. We have implemented close to 200 CAPAs, and we will be hopefully sending FDA soon next year update on the CAPA and the CAPA effectiveness, which is the basis of getting approval. But with this, I want to hand over to Joseph McClellan, over to you.

Thank you, Robert. Hello, I'm Joseph McClellan, Chief Operating Officer for Alvotech. I'm with Alvotech now for over 6 years, start off as Chief Scientific Officer and have expanded my responsibilities recently. I've been responsible for helping to drive all of our R&D portfolio and now looking to continue that good progress with our growing portfolio, as well as driving products on market. If we go to the next slide, as Robert said, we have received complete response letters for our 4 BLAs that -- 3 of our 4 BLAs that we submitted in the fourth quarter of 2024. Those are for the biosimilars to Simponi and Simponi Aria and Eylea. We also do anticipate based on our clarification letter for those CRLs called the [ PAL ], receiving a CRL for our AVT03 for the dual product, Prolia and Xgeva. Since our inspection closed on the 4th of July of this year, we have been working very closely with the FDA to resolve all of the outstanding issues, and we're very optimistic they will be all closed very shortly. As Robert said, as part of our requirements and request for funding, we're continuing to build out our R&D pipeline. That does include our strategic acquisitions. Robert mentioned for the R&D operations in Stockholm, Sweden, as well as our Iverzly, CMO for assembly pack and label of our devices. We also are very focused on scaling up and launching our products that are approved recently in Europe and Japan as we get excited for that exciting information. And so these fundings, this offering will help support our lead position in development of biosimilars, while also enabling our strategic launches of our products around the world. On the next slide, we can talk a little bit more about our current on-market products, where we continue to see a good amount of momentum in growth. We are excited that AVT02, our biosimilar to Humira and AVT04, our biosimilar to Stelara, are doing very well on both the U.S., European markets, as well as in other markets around the world. Regarding our biosimilar to Humira, it continues to hold the second largest market share of Humira biosimilars in the U.S. And in Europe, we're seeing that it has top position in several of the top 10 European markets. We continue to see very good quarter-over-quarter growth. Our biosimilar to Stelara, we also are seeing a positive impact in the U.S. of our STADFAST strategy with our U.S. partner to grow the business. And in Europe, where we were one of the first to launch in many markets, we are seeing that we continue to have a leading position. And so while we continue to see the shift for these two products go from the reference product, to biosimilars, we see a very nice runway for our products in the future. On the next slide, I want to talk about our exciting launches for our three products. that we have recently gained approval for in the U.K., Japan and the European economic area. These are very important products ex U.S., where the total addressable market for these products is approximately $3 billion outside the U.S. We're most excited about our biosimilars to Simponi and Eylea. For Simponi, we are the first to launch. We do anticipate being alone in many of the European markets. And we're also excited for our Japanese launch in the first half of 2026. For Eylea, we were able to launch very early upon the loss of exclusivity. And so have been seeing a very nice strong order book pulling through our products in Europe and the U.K. And we're also anticipating our Japan launch in the first half of 2026. We also are on the market for AVT03, our biosimilar to Prolia and Xgeva in Europe. So it's wonderful to see that these products are launching, that we have wonderful partners to help us pull through and gain appreciable market share in Europe. On the next slide, I just want to talk briefly before I hand it over to Linda regarding our overall R&D pipeline. As Robert said, we have over 30 molecules in development. We have been very focused on building our portfolio, building upon the success of our first 5 molecules to get first class approval. And we're seeing that we have a few market products that we'll be able to submit BLAs and/or MAAs next year. Those are similar to Entyvio and biosimilar to Eylea HD. So these are really exciting that these products are advancing. We also are excited that our potential biosimilar to Xolair is likely to gain approval next year in the U.K. and European markets. After that, we have a growing portfolio. We anticipated in 2023 that the regulations would be changing associated with the expectations for patient confirmatory efficacy and safety studies. And as a result, we began to really invest in building out best-in-class R&D capabilities from beginning to end so that we can take advantage of the opportunity of having a very large portfolio of potential biosimilars understanding that many biologics are coming off a patent over the next 5 to 10 years, and there will be a lot of opportunity for us to provide these very important medicines to patients around the world and provide good value to our stakeholders. With that, I will turn it over to Linda.

Thank you very much, Joe. Quick introduction of myself. My name is Linda Jonsdottir. I joined Alvotech in July this year. So a few months in and very much loving the entity around here on this very important journey we are on. I was prior working for a big part of my career for a global company in food tech called Marel, listed in two markets. So I was there for 15 years, 8 years as CFO and 2 years as COO. Also been in industries as banking, transportation and been on a number of boards. There are like a few slides about the financials in the past that I'm happy to take questions on, but I would want to jump to the 9 months financial slide just to cover a bit high-level picture. Alvotech has delivered strong take growth in past years since launching of our first biosimilar, and there is a strong continued momentum in demand for our on-market products. We are, like steo-by-step getting also more and more diversification into our revenue profile as we launch more products to the market. And when I mentioned diversification, it is both with respect to revenues by products and also by geographies as we continue scaling of our commercialized products with our recent approvals of AVT05, AVT06 and AVT03 in Europe, U.K. and Japan. This slide shows like well the trend since our -- on our financial side since 2022 to date. To focus on the financials for the first 9 months of 2025, we did deliver good revenue growth of 24%, and that is also related to our momentum after U.S. launch of Humira and early traction for Stelara. Gross margin was at a strong level of 59%, also supported by strong licensing revenues. And even though we see improvements in product margins looking at the first 9 months of 2025 compared to 2024, we did see some softness in product margins in Q3 '25, where product revenues and product margins were impacted by timing of orders and investments in facility improvements related to FDA matters that Robert and Joe both covered. Looking at the adjusted EBITDA, it is at the level of 16% for the first 9 months. Margin was comparatively higher in 9 months '24 due to the higher licensing revenues related to 3 biosimilar submissions and the U.S. launch of our biosimilar to Humira, along with the launch of our biosimilar to Stelara in Europe. We also see impact from higher R&D and G&A in '25 on our EBITDA. On the cost side, increased R&D efforts are in relation to the accelerated pipeline expansion to build up the most valuable portfolio of biosimilars in the industry and to drive future growth that Joe covered well on the previous slide. We are as well higher on the D&A cost, and that's was needed to enable us to scale operations and infrastructure and with in mind that we want to drive operational efficiency as we continue our journey. Cash position reflects outflows connected to inventory buildup that are needed to support our launches that are taking place now. Also CapEx investment, the company is well invested and M&A activities. Then if I jump to the guidance slide for 2025. When we issued our Q3 quarterly results, we did come out with a revised guidance for 2025 and are today reconfirming our guidance on strong performance in Q4 '25, both for revenues and adjusted EBITDA. And as you can see highlighted on the slide, the top line guidance is $570 million to $600 million, and EBITDA is in the range of $130 million to $150 million, which then translates into 19% increase in revenues year-on-year and 30% improvement in adjusted EBITDA. Q4 '25 will, therefore, be the strongest quarter like for licensing revenues, which is driven by significant contributions from early phase assets combined with newly signed licensing agreements. where we have been like getting marketing approval and launches of new products across Europe and also continued advancement of mid- to late-stage assets in development. So reconfirming the guidance we gave out around the Q3. And then touching finally the 2026 guidance, which is new. We're giving -- coming out with a guidance for 2026 during this process. We are anticipating revenues in the range of $650 million to $700 million, reflecting continued double-digit sales growth -- adjusted EBITDA expected to increase to $180 million to $220 million. And I want to highlight that the lower end of the guidance assumes a cautious view on the timing of U.S. market entry for our pending launches. We are investing a lot in R&D around $250 million planned for 2026, which will then allow us to continue having such a strong and valuable biosimilar pipeline. And the new funding will support us on that journey. And we are going to be cash flow positive in Q4 2026. And this will -- new funding will bridge us to that cash flow positivity. Just a bit like on the overall picture, the strategic focus for the next 18 months is like very much on execution to unlock long-term growth. We will continue advancing the pipeline and also supporting multiple global launches to deliver the solid sales growth. And I would say also the diversification of revenues across geographies and products is also very important. So yes, very much looking forward to working on this with the team. So I'll stop here and hand it over hand it back over. I guess we are down to Q&A now.

Yes, Christian, are you going to assist us with that? I think...

Yes. [Operator Instructions] So I'll start with one question, and it's regarding if you can say a little bit more about the -- you mentioned the revenues and the EBITDA for 2026. Can you give a little bit more update on how you see the CapEx in 2026, roughly?

Yes. So like on tangible CapEx, I would say like the company is very well invested. We have been investing a lot in building up the foundation. So I do see opportunities to lower the investment amount going into tangible CapEx for the year 2026. And at the same time, we are like in a position to continue our growth journey despite that. On the R&D part, we will continue as planned, like we are planning to, yes, continue having this pipeline that Joe was walking you through, and that will mean continued investment on that front.

Yes. Very good. I don't see any questions here. We'll do one more question, which I think, which we have been receiving some questions on, and it's regarding the complete response. Robert, maybe you can just briefly describe what that was all about.

Yes, Joseph. I think maybe you take the top three items there, if you will?

Yes. Thank you, Robert. Happy to. Yes. So we -- as we said, we concluded an inspection in July of 2025, which led to our complete responses that we received so far for our BLAs. In that, it was clear that there were 3 issues of concern from the FDA as they rank them. The FDA always when they provide their deficiencies, they put them in the order of what they believe is the perceived severity. Observation one was regarding the application of silicon oil to our drug product machinery. This is something that we've been doing since 2018 at the guidance of the manufacturer for the machine, and it also is associated with our earlier approved products. And they asked that we just remove it. We've ultimately agreed that we will remove the silicon oil from our drug product manufacturing parts, and we can manage around that. The second was regarding how we handle complete -- sorry, our product quality complaints. We saw a reasonable uptake in product quality complaints in the U.S. between our two inspections, one of which was in September of '24, followed by the one that we had in June, July of '25. Understandably so, we went from approximately 100,000 to 200,000 products in the market in the U.S. to over 2 million. And so we had an increase. The FDA had some concerns about how we just manage that. We've been working through that with them, and we've fully overhauled the way that we do our product quality complaints and have an improved process that we're very confident in moving forward with and addresses the FDA concerns. Lastly, an opportunity for environmental monitoring, microbial control. We look at this as something that's very much a continuous improvement for us. We agree with the FDA that there always can be improved safeguards. However, it's important to note that the FDA's deficiencies and observations were about concerns of things that could happen to the product, but nothing actually has. We've never had any sterility issues with our drug product manufacturing. We passed all media fills that we've done over the last 7 to 8 years. And we have never had a failure in our product that we produced from a sterility or a microbial contamination perspective. So a lot of confidence that our product is very safe. That's why we're still very good standing with EMA, with the PMDA, they've inspected us and even the FDA, right? The FDA, it is very important to note that none of these concerns led to us changing the classification of our site nor prohibiting the manufacture and supply of our biosimilars to Humira and Stelara to the U.S., which we have continued to manufacture and deliver that. Hopefully, that answers that question.

Yes, there was very good. There was actually -- there is a question regarding the CRL here, and it actually you have answered some of it. So the question here, you seem confident that the issues related to the CRL 404 can be resolved shortly. Can you please provide a bit more detail on what remains to be addressed and where you are in the process?

Yes. These were actually the three main topics, which was in the CRL. So I think Joseph have already answered that.

Okay. I think we covered the CRL then, and there are no further questions. So with that, I think we will conclude this global investor call.

Yes. Thank you so much for joining. Great pleasure to have a chance to tell you all about Alvotech, and hope to see some of you in the book. So thank you so much.

Thank you very much.